The document summarizes Phase 2 of a CBO project in Indonesia. Key points: - Phase 2 will use an "on-granting" mechanism and increase the role of local governments to mainstream and scale up the program. - Local governments will prepare CBO proposals for expansion and receive grants for successful proposals. - An oversight consultant will assist in assessing proposals. Capacity building will support CBOs and local governments. - CBOs will implement expansions using an output-based grant model requiring counterpart funding from local governments and CBOs. Grants will cover approximately 60% of expansion costs. CBOs can optionally borrow to leverage grants. - The program aims to upgrade 1,300

1. CBO Program IndII 2 – Outline Concept
31 January 2013
IndII Ratu Plaza Tower

2. Review of Phase 1 Project
Phase 1 Objectives : (i) assist 25 CBOs in 5 districts to access
credit for expansion of their existing supplies; and (ii)
support 20 CBOs in 2 districts to achieve CBO – commercial
partnerships for service expansion and improvement.
Outputs from phase 1: 21 CBOs obtained loans totaling
$225,000 for expansion of 3,108 connections;
2 CBOs signed build-lease-transfer investment contracts and
2 CBOs signed annual service/management contracts with
local contractors.
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3. What we learned from Phase 1
Credit model unwieldy – IndII MoU with Bank; IndII grant
held in escrow; only kabupaten banks interested;
CBOs preferred grants – PDAMs get hibah, why do CBOs
have to borrow ??
Strong demand from CBOs to expand.
IndII program generated interest at LG and Province.
CBOs not interested in ceding control – no PPP, but build
lease transfer (BLT) contracts for expansion acceptable
CBOs not interested in multi user service contracts.
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4. Summary of the Phase 2 CBO Project
• Phase 2 CBO program uses the on-granting mechanism.
• Phase 2 program increases the role and responsibility of the local
governments >> mainstreaming and scaling up by GoI.
• CBO 2 will align with Pamsimas and only go to non Pamsimas LG
• The LGs will be responsible for preparation of CBO proposals for expansion.
• Local governments will be compensated by a grant for successful
preparation of CBO proposals – on acceptance in the CBO grant program
• An IndII oversight consultant will assist the GoI implementing agency in the
assessment the proposals.
• WSP parallel Capacity Development Program will support institutional
strengthening and capacity development at CBO and LG.
• The CBOs will implement the expansions using an output based grant model
requiring counterpart funding from LG and the CBOs.
• The grant is anticipated to cover approximately 60% of the cost of the
expansion.
• CBOs may leverage the grant by borrowing from banks but this is optional.
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5. Summary of the Phase 2 CBO Project
• Phase 2 CBO program uses the on-granting mechanism.
• Phase 2 program increases the role and responsibility of the local
governments >> mainstreaming and scaling up by GoI.
• CBO 2 will align with Pamsimas and only go to non Pamsimas LG
• The LGs will be responsible for preparation of CBO proposals for expansion.
• Local governments will be compensated by a grant for successful
preparation of CBO proposals – on acceptance in the CBO grant program
• An IndII oversight consultant will assist the GoI implementing agency in the
assessment the proposals.
• WSP parallel Capacity Development Program will support institutional
strengthening and capacity development at CBO and LG.
• The CBOs will implement the expansions using an output based grant model
requiring counterpart funding from LG and the CBOs.
• The grant is anticipated to cover approximately 60% of the cost of the
expansion.
• CBOs may leverage the grant by borrowing from banks but this is optional.
5

6. Summary of the Phase 2 CBO Project
• Phase 2 CBO program uses the on-granting mechanism.
• Phase 2 program increases the role and responsibility of the local
governments >> mainstreaming and scaling up by GoI.
• CBO 2 will align with Pamsimas and only go to non Pamsimas LG
• The LGs will be responsible for preparation of CBO proposals for expansion.
• Local governments will be compensated by a grant for successful
preparation of CBO proposals – on acceptance in the CBO grant program
• An IndII oversight consultant will assist the GoI implementing agency in the
assessment the proposals.
• WSP parallel Capacity Development Program will support institutional
strengthening and capacity development at CBO and LG.
• The CBOs will implement the expansions using an output based grant model
requiring counterpart funding from LG and the CBOs.
• The grant is anticipated to cover approximately 60% of the cost of the
expansion.
• CBOs may leverage the grant by borrowing from banks but this is optional.
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7. More Lessons from Phase 1
• Many cases of investment to upgrade ‘overextended’
systems – yielded few new connections but upgraded
connections to ‘normal’ service.
Description Before After
Actual Theoritical After
Investment Costs IDR - 163,375,000
Connection unit 742 353 793
New Connection unit - 51
Production Capacity l/sec 1.53 3.53
Water Consumption m3/unit/month 3.00 9.00 9.00
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8. Design Point
Capacity / Consumption
Supply Capacity
d
m an
d e
t ive
m ul a
Cu
Connections

9. Design Point
Capacity / Consumption
Supply Capacity
Consumption per
connection
d
m an
d e
t ive
m ul a
Cu
BASELINE
Connections

10. Actual New
Apparent
New
Design Point
Capacity / Consumption
Supply Capacity
Upgrade Supply
Consumption per
connection
d
m an
d e
t ive
m ula
Cu
Connections

11. More Lessons from Phase 1
• Many cases of investment to upgrade ‘overextended’
systems – yielded few new connections but upgraded
connections to ‘normal’ service.
Description Before After
Actual Theoritical After
Investment Costs IDR - 163,375,000
Connection unit 742 353 793
New Connection unit - 51
Production Capacity l/sec 1.53 3.53
Water Consumption m3/unit/month 3.00 9.00 9.00
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12. Formulating the “output based”
Component
• Separate New and Expansion costs:
– Expansion $160 /hh
– Upgrading $50/hh
• Preparation of CBO projects supported by LG:
– $50,000 / CBO grant for preparation
• Expansion Financing: Average cost/CBO $25,000
– Grant 15,000; LG 8,000; CBO 2,000
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13. Anticipated Output
• 40 local governments
• 1,300 CBOs upgraded – 650,000 hh
• 20 New CBO built – 4,000 hh
• Total benefiting population approximately 2,600,000
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14. Alignment with Pamsimas 2
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15. ANNEXE – Assumptions and Costs
Number of LGs 40
Number of CBOs/LG 30
Number of CBOs 1,200
Number of HH/CBO 500
Total HH 600,000
AU $
LG CBO Grant
Preparation Cost/LG 100,000 50,000 50,000
Preparation Cost 4,000,000 2,000,000 2,000,000
Investment cost/CBO 25,000 2,000 8,000 15,000
Investment cost/LG 750,000 60,000 240,000 450,000
Total Investment 30,000,000 2,400,000 9,600,000 18,000,000
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16. Next Steps
• Feedback and finalise Concept Note
• AusAID Peer Review CN
• Parallel start on CBO PDD – in collaboartion with BoI and
WSP
• GoI advance selection of Kabupaten and longlist of Desa
• Complete PDD May 2013.
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